IATA states airline profits to improve, margins still 'pathetic'

IATA has again raised (14-Dec-2010) its profit forecast for the global airline industry in FY2010 to USD15.1 billion, up from its Sep-2010 forecast of USD8.9 billion in net profit, in response to a strong cyclical upswing in revenues and much better utilisation of capacity by airlines. IATA maintains 2011 will present "tougher conditions" for the industry despite upwardly revising its profit forecast for FY2011 from USD5.3 billion to USD9.1 billion, although net margins will remain weak at 2.7% in 2010 and declining to 1.5% in 2011. IATA still expects Asia Pacific carriers to lead in terms of profitability in 2010 and 2011 on the back of strong GDP growth. Details include:

• FY2010 forecast:
  • Revenue: USD565 billion, +17.2% year-on-year;
    • Passenger: USD437 billion, +16.8%;
    • Cargo: USD61 billion, +27.1%;
  • Costs: USD537 billion, +11.0%;
    • Fuel: USD139 billion, +23.0%;
  • Operating profit: USD28.8 billion, compared with a loss of USD1.2 billion in p-c-p;
  • Net profit: USD15.1 billion, compared with a loss of USD9.9 billion in p-c-p;
    • North America: USD5.1 billion, compared with a loss of USD2.7 billion in p-c-p;
    • Europe: USD0.4 billion, compared with a loss of USD4.3 billion in p-c-p;
    • Asia Pacific: USD7.7 billion, compared with a loss of USD2.7 billion in p-c-p;
    • Middle East: USD0.7 billion, compared with a loss of USD0.6 billion in p-c-p;
    • Latin America: USD1.2 billion, +140% year-on-year;
    • Africa: USD0.1 billion, compared with a loss of USD0.1 billion in p-c-p;
  • Passenger numbers: 2422 million, +8.7%;
  • Passenger yield: n/a, +7.3%;
  • Cargo volume: 43.7 million tonnes, +18.4%;
  • Cargo yield: n/a, +7.0%;
• FY2011 forecast:
  • Operating revenue: USD598 billion, +5.9%;
    • Passenger: USD462 billion, +5.7%;
    • Cargo: USD65 billion, +6.6%;
  • Costs: USD578 billion, +7.7%;
    • Fuel: USD156 billion, +12.2%;
  • Operating profit: USD20.5 billion, -28.8%;
  • Net profit: USD9.1 billion, -39.7%;
    • North America: USD3.2 billion;
    • Europe: USD0.1 billion;
    • Asia Pacific: USD4.6 billion;
    • Middle East: USD0.4 billion;
    • Latin America: USD0.7 billion;
    • Africa: break-even;
  • Passenger numbers: 2544 millions, +5.0%;
  • Passenger yield: n/a, +0.5%;
  • Cargo volume: 46.0 million tonnes, +5.3%;
  • Cargo yield: n/a, stable. [more] [more - Bisignani speech]

IATA: "Our profit projections increased for both 2010 and 2011 based on an exceptionally strong third quarter performance. But despite higher profit projections, we still see the recovery pausing next year after a strong post-recession rebound. And the two-speed nature of the recovery is unchanged with European airlines continuing to underperform other regions. Margins remain pathetic. We are nowhere near covering our cost of capital. The industry is fragile and balancing on a knife edge. Any increase in profits is a welcome step in the right direction. But the fact that we can increase our profit forecast by 70% and still be left with a net margin of just 2.7% shows just how far this industry has to go to achieve a normal level of profitability," Giovanni Bisignani, Director General and CEO.